The pros and cons of paying off your mortgage early

  • Paying off your mortgage early is a great way to free up monthly cash flow and pay less interest.
  • But you lose your mortgage interest tax deduction and would probably make more by investing instead.
  • Before making your decision, consider how you would use the extra money each month.
  • Read more insider coverage of personal finance »

Paying off your mortgage early can be a smart financial move. You’ll have more money to play with each month once you stop making payments, and you’ll save on interest.

Make additional mortgage payments is not for everyone, although. Maybe you’re better off focus on other debts or invest the money instead. Here are the pros and cons of paying off your mortgage early.

The benefits of paying off your mortgage early

The disadvantages of paying off your mortgage early

Questions to ask yourself before paying off your mortgage early

How would you use the money you would save on monthly payments?

If you’re paying off your mortgage early so you have more monthly cash flow, you should have an idea of ​​how you’re going to use that extra money. If you want to cut your $900 mortgage payment and invest $900 a month instead, that could be a good use of the money.

Ultimately, how you spend the extra money is up to you. But if you can’t figure out what to do with the money, or if you’d spend it on reckless purchases, paying off your mortgage early might not be the best financial move.

How Does Prepaying Your Mortgage Fit Into Your Retirement Savings?

The answer to this question will be different for everyone.

If you know you want to stay in that house when you retire, paying it off now might be the right move so you don’t have to make monthly payments when you retire.

But if you say 10 years before retirement and haven’t started investing yet, investing is a better use of the money than prepaying the mortgage.

Do you have other debts to pay?

The general rule of thumb is that you should focus on paying off higher-interest debt before paying off lower-interest debt. You may be paying a higher interest rate on a credit card or personal student loan than on your mortgage, giving you more of a benefit by paying it off early.

However, don’t pay so much into your higher-interest debt that you risk defaulting on your mortgage payments. Yes, Credit cards can be expensive, and the issuer can take legal action if you default on card payments. But defaulting on mortgage payments can pose an even greater risk because you could lose your home.

There is no clear right or wrong answer to whether or not you should pay off your mortgage early. It depends on your situation and your personal goals.

mortgage calculator

Use our free mortgage calculator to see how paying off your mortgage early could affect your finances. Enter your numbers, then click More Details for information about the monthly extra payment.

mortgage calculator

Your estimated monthly payment

  • Pay a 25% you would save yourself a higher down payment $8,916.08 on interest charges
  • interest rate reduction 1% would save you $51,562.03
  • pay surcharge $500 each month would shorten the loan term by 146 months

By investing a few hundred dollars a month in your mortgage, you could own your home a full few years sooner. But even if you don’t have that much extra cash every month, you can choose to just put $50 or $100 to your payments.

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